Zambian private sector grows at record pace, says Stanbic

The latest Purchasing Managers’ Index (PMI) survey data from Stanbic Bank Zambia and IHS Markit has signalled a further improvement in business conditions in the Zambian private sector, marking the seventh straight month of improving business conditions.

According to the latest PMI report for November 2017, higher underlying demand formed the basis for growth as new orders rose at the quickest pace since the survey was launched. This, the report states, led businesses to increase output at a record rate. Firms also reacted by expanding their capacity. Workforce numbers continued to grow, while purchasing activity increased at a record pace. However, capacity pressures were still evident as outstanding business accumulated. Elsewhere, survey data signalled a reduction in output prices as firms attempted to boost demand further.

The PMI registered at 54.7 in November, up from 53.5 in October. This marked the seventh straight month of improving business conditions in the Zambian private sector. Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.

The PMI report states that the rate of growth was the fastest observed since the survey began in March 2015. Business activity in the Zambian private sector increased for the sixth month in a row in November, and at a record pace. The data for the November report was collected on November 13-24.

Panellists frequently reported that an expanding customer base was responsible for the latest rise in output. New orders also rose at the fastest pace observed over the survey’s 33-month history. Buoyed by higher underlying demand, companies increased capacity further in November.

Recruitment efforts led employment to expand for the seventh successive month. Furthermore, purchasing activity increased at a record pace, as firms attempted to accommodate higher volumes of orders. Nonetheless, survey data showed that efforts to accommodate high volumes of new orders were not sufficient as outstanding business at Zambian private sector companies increased for the third consecutive month.

Moreover, the rate of backlog accumulation was the fastest so far. Stocks of pre-production inventories also expanded in November, and at a pace only slightly slower than the previous month’s record. Elsewhere, cost burdens rose at Zambian private sector businesses for the fourteenth month in a row in November. However, data suggested that firms absorbed higher input costs as output prices were reduced further. Some panellists reported lowering charges to help attract customers

Commenting on November’s survey findings, Victor Chileshe, Head of Global Markets at Stanbic Bank Zambia said: “Input cost inflation is weighing in on producers. However, the stability in the currency after an initial depreciation has enabled them to continue absorbing this incremental cost on behalf of their customers. Increased demand and volume of sales has also helped. Access to cheaper credit (given recent monetary policy rate changes) in the following months will also help producers finance working capital.”